Initial price thoughts for the senior unsecured RegS/144A long 12 year bond were 7.875% area. Ukraine is rated B3/B/B.
The deal, expected to close on Wednesday afternoon, is expected to be for around $2bn.
According to ING, Ukraine can avoid paying a new issue premium, with the yield expected to land at as tight as 7.55%, in the view of ING.
The sovereign is also offering a concurrent tender on up to $750m of its 2021 and 2022 notes.
Joint lead managers are Goldman Sachs and JP Morgan.
Bankers, investors and analysts alike agreed that pricing on recent emerging market deals — both investment grade and below — has improved as a result of greater stability in markets.
“IPTs are impressive for the issuer,” said Trieu Pham, EM sovereign debt strategist at ING. "If Ukraine manages to price in the higher 7% range, it would be a great success. I have a feeling it may very well come a bit tighter, even towards 7.55-7.60%.”
“Recovery in the secondary market was the most important factor that allowed high yield sovereigns to come back to the market,” Pham said, adding that the the JP Morgan EMBI (Emerging Market Bond Index) is now more than 200bp away from the peak of the coronavirus crisis-induced spread widening.
Ukraine’s $10bn budget deficit this year is expected to be filled by funds from international finance institutions, debt capital markets and its own local currency markets. The eastern European country has already secured a $5bn stand-by arrangement financing package from the International Monetary Fund.
“We will definitely see more high yield credits come to market – in the last two days we have seen Ukraine and Jordan, where things do not necessarily look rosy in economic terms,” added Pham.
Similarly, on Tuesday Poland, rated A2/A-/A-, raised a three year RegS €2bn bond with a 0% coupon. The spread for the Eurobond was set at 29bp over mid-swaps, while the yield was -0.11%.
Bookrunners on that trade were BNP Paribas, Citi, Goldman Sachs, HSBC, PKO and Société Générale.
Though some bankers and investors said that the bulk of sovereign issuance across CEEMEA was out of the way, others are convinced a flurry of supply will enter markets in coming weeks to pre-empt fears of a second wave of coronavirus infections injecting more volatility into the market.
“There are other names we could see from CEE, including Bulgaria and Serbia. Romania has just upped its external debt limits, so it is also a likely candidate,” added the London-based banker.